THE NEW KID ON THE BLOCK – AMAZON DELIVERY SERVICES

In an effort to handle more of the packages that are picked up from merchants and delivered to buyers, Amazon has recently rolled out Amazon Shipping after test-marketing the service in Los Angeles and London.

With Amazon Shipping, rather than sending the company’s packages out through FedEx, UPS and other shipping firms, the company is now offering to pick up shipments themselves, directly from merchants’ warehouses, and deliver the parcels to Amazon shoppers’ home or business locations.  In order to convince merchants to switch over from their traditional shippers, Amazon is waiving many traditional fees that established shippers use to pad their revenue, such as extra charges to deliver packages to homes or delivery charges for holidays and weekends.  The guaranteed service, with fewer surcharges, is expected to upend shipping in the residential delivery services.  Sounds like the traditional Amazon approach – remember the advent of the book selling business.  An Amazon spokesman indicates that, “Amazon is always working to develop new, innovative ways to support the small and medium businesses who sell on Amazon, including testing shipping programs that help these businesses get packages to their customers quickly and reliably.”  Surcharges can add up to hefty additional charges: the residential surcharge at FedEx is $3.80 per parcel; $3.95, at UPS.  And these two carriers also add on “fuel surcharges” which fluctuate weekly, with market prices.  The additional fees, of various sorts, can add up to 30% of the shipping cost, according to an article in the WSJ.  A merchant who reviewed Amazon’s rates and compared them to other carriers’ rates, indicates that the Amazon rates are about 10% lower than FedEx and UPS, on average.  As I’ve mentioned in previous posts, the large carriers use the additional fees to help meet the need to add shipping capacity in response to the surge in e-commerce shipping.  Perhaps, now, with Amazon’s Amazon Shipping initiation, they won’t need that extra capacity.  To date, the traditionl carriers have tended to discount Amazon’s potential entry into that market niche, stating that “it would take billions of dollars and years of expertise to create a competitor with the breadth of coverage that either carrier (FedEx, UPS) offers globally.”  Well, I’d say that they haven’t been following Amazon’s recent actions very closely (check out my recent post on Amazon’s delivery arrangements in rural India) – apparently there have been billions of dollars and years’ worth of expertise put into play.

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